Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Wednesday, October 18, 2017

Article on The Demand for Fiduciary Services: Evidence from the Market in Private Donative Trusts

Bulk-cash-smuggling-photoAdam Hofri-Winogradow recently published an Article entitled, The Demand for Fiduciary Services: Evidence from the Market in Private Donative Trusts, 68 Hastings L.J. 931 (2017). Provided below is an abstract of the Article:

Recent revelations on the use of fiduciary services raise concerns regarding their use for tax and creditor avoidance. Yet given the secrecy shrouding much of the fiduciary industry, we do not know which fiduciary services are used for such purposes, and to what extent. Shining a light on a particularly obscure part of the industry, this Article presents and analyzes the results of the first-ever global survey of professional service providers to private donative trusts, having obtained 409 usable responses from professionals in 82 jurisdictions, amplified by twenty-five interviews conducted with professional trust service providers in five jurisdictions. I report new data on four controversial features of current trust practice: (1) perpetual and extreme long-term trusts; (2) trust terms exonerating trustees from liability to beneficiaries; (3) tools rendering beneficiaries' entitlements inaccessible to their creditors; and (4) the control of trusts by their creators.

I find that trusts drafted to subsist for more than a century are fairly common, especially offshore, but many such trusts are not in fact likely to survive that long. Trustee exculpatory terms are now standard in donative trusts serviced by professionals, with most settlors neither demanding nor receiving any quid pro quo for their inclusion. Anti-creditor techniques protecting beneficiaries' entitlements are even more ubiquitous than trustee exculpatory terms, particularly in trusts serviced by U.S.-resident providers. Many protected beneficiaries are not less able than the average person to take care of their financial affairs. Finally, express reservation of powers by trust settlors is a majority phenomenon in the United States, but a minority one elsewhere. The actual control of trusts by their settlors is likewise far more common in the United States than elsewhere. I conclude the Article with recommendations for law reform that makes trusts likelier to benefit their beneficiaries and less likely to avoid duties owed to creditors and the state.

October 18, 2017 in Articles, Estate Planning - Generally, Professional Responsibility, Trusts | Permalink | Comments (0)

Tuesday, October 17, 2017

Article on Trust Decanting: a Critical Perspective

How-to-decant-wine-01-950x633Stewart E. Sterk recently published an Article entitled, Trust Decanting: a Critical Perspective, 38 Cardozo L. Rev. 1993 (2017). Provided below is an abstract of the Article:

Trust decanting has some clear benefits. When the drafting lawyer has made a mess of the trust, decanting will sometimes enable the trustee to correct mistakes and to clarify ambiguities without the need for costly judicial proceedings. Decanting also enables trustees of some older trusts to avoid investment inefficiencies that were not well-understood when their trusts were drafted. In emphasizing these benefits, the proponents of decanting have largely ignored two significant issues raised by the decanting movement.

The first issue is whether a statutory grant of decanting power, when the trust instrument does not authorize decanting, conflicts with basic principles of testamentary freedom. Although the justification for decanting rests on its potential to effectuate the settlor's purposes, it is not always easy for a trustee to determine the intent of a now-dead trust settlor when the settlor did not memorialize that intent in the trust instrument. The trustee, who may have been selected for reasons other than intimate knowledge of the settlor's wishes, will not always be in an optimal position to assess that intent. Moreover, the trustee's own interests may cloud its judgment about whether to decant.

The second issue, which is in some tension with the first, is whether decanting enables trustees to effectuate the settlor's intent when, as a matter of policy, there is no good reason for exalting the settlor's presumed intent. The legal system has long tolerated the distributional inequities generated by trusts in large measure because of the incentives the trust device provides to potential settlors: people with wealth and talent may engage in more productive activity, and may partake in less frivolous consumption, if they know they can provide for future generations without worrying about the debt collector or the tax collector. But even if we assume that these efficiency considerations outweigh distributional inequities, is there any reason to enable trust beneficiaries to extract newly available benefits that could not possibly have influenced the trust settlor?

This Article: addresses these questions. After Part I's survey of trust law reforms that provided the impetus for the decanting movement, Part II explores the origins, justifications, and mechanics of trust decanting. Parts III and IV, the heart of the Article: , establish that the extraordinary breadth of decanting statutes risks frustrating the intent of settlors and enables trustees to impose external costs without generating commensurate social benefits. Part V concludes with a discussion of the potential obstacles to reform.

October 17, 2017 in Articles, Estate Planning - Generally, Estate Tax, Professional Responsibility, Trusts | Permalink | Comments (0)

Wednesday, October 11, 2017

Estate of Michael Jackson v. Commissioner of Internal Revenue: Tax Court Allows Testimony of Expert who Gave False Information

Famous-liarIn a tax proceeding, the United States Tax Court denied the Estate of Michael Jackson’s motion asking the court to exclude testimony by a government expert witness. The expert had previously provided false information to the court regarding whether he had written a validation report for the IRS’ Examination Division relating to the third-party’s taxpayer audit. Jackson’s estate made numerous objections to the expert’s testimony including a request that it be excluded based on the witness’s multiple lies and deceit. The court denied the motion.

See Quinton Weinstein, Estate of Michael Jackson v. Commissioner of Internal Revenue: Tax Court Allows Testimony of Expert who Gave False Information, Wealth Strategies Journal, October 2, 2017.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.) for bringing this article to my attention.

October 11, 2017 in Estate Administration, Estate Planning - Generally, Professional Responsibility | Permalink | Comments (0)

Tuesday, October 10, 2017

How the Elderly Lose Their Rights

Senior-financial-abuseRudy North once began his days in the relative comfort of his own home, reading newspapers and novels at his leisure. His wife of fifty-seven years, Rennie, recovering from lymphoma and suffering with neuropathy, was a bit slower but just as pleased to greet the day. Both were living happily together with daily assistance from a nurse who provided Rennie aid with bathing and dressing. This delightful routine ended abruptly and without warning upon the unexpected entrance of April Parks into their once-tranquil lives.

Parks was the owner of A Private Professional Guardian, a company specializing in gaming the legal and medical systems, with the help of complacent judges and crooked medical staff, in order to obtain guardianship over elderly individuals in order to siphon away their assets through fees and expenses. Unbeknownst to the Norths, Parks had attained a letter from a physician’s assistant indicating the Norths posed a substantial risk for mismanagement of their own medications. Jon Norheim, the Clark County guardianship commissioner at the time, granted Parks’s request to become guardian for the Norths. This had essentially become routine, as Norheim granted Parks a guardianship about once per week. Neither Rudy nor Rennie were subject to any formal testing or psychological evaluation prior to the complete and total stripping of their civil liberties.

After a long and arduous struggle and substantial intervention by third parties, the Norths are now living with their daughter in a converted office. They have few assets, as Parks gorged her seemingly insatiable appetite on their life savings. Despite a substantial amount of blame that can laid at the feet of the Nevada legal system, it appears as though the victims of this schema have little recourse for remedy.

See Rachel Aviv, How the Elderly Lose Their Rights, The New Yorker, October 9, 2017.

Special thanks to Lewis Saret (Attorney, Washington, D.C.) for bringing this article to my attention.  

October 10, 2017 in Current Events, Disability Planning - Health Care, Elder Law, Estate Planning - Generally, Professional Responsibility | Permalink | Comments (0)

Monday, October 9, 2017

Wills for Veterans Initiative

6a49ca822a4572fe83c54424d672c4e9--new-news-news-todayThe Federal Bar Association (FBA) is launching a new pro bono program in order to help veterans draft their wills. “Wills for Veterans” is a project involving FBA chapters across the United States that will coincide with Veterans Days on November 11th. FBA would like local chapters to arrange their events for Thursday, November 9th and is offering planning and scheduling assistance for each chapter.

See Wills for Veterans Initiative, Federal Bar Association, 2017.

October 9, 2017 in Current Events, Estate Planning - Generally, Professional Responsibility, Wills | Permalink | Comments (0)

Saturday, October 7, 2017

CLE on Estate Administration Boot Camp

0000000 CLEThe National Business Institute is holding a conference entitled, Estate Administration Boot Camp, which will take place on Tuesday, October 10, 2017, at the Courtyard by Marriott San Luis Obispo in San Luis Obispo, CA. Provided below is a description of the event:

Program Description

Everything You Need to Know About Effectively Administering an Estate

Are you fully confident in your knowledge of the latest court and tax rules and the most effective transfer tools to ensure each client's estate is laid to rest according to the decedent's wishes, with minimal tax burden? This comprehensive 2-day instruction will give you all the skills you need to administer estates that include trusts and/or business interests without a hitch. Register today!

  • Don't miss any crucial notice and filing requirements when opening the estate - learn what must be done right away.
  • Get helpful forms and checklists that will help you in administration.
  • Understand how income and estate tax deductions interact and find the most advantageous way to structure the tax returns
  • Learn how to use disclaimers more effectively.
  • Clarify what must be done when the trust becomes irrevocable.
  • Protect your professional reputation with a practical legal ethics guide focused on trusts and estates practice.
  • Prevent mistakes in final petition and ensure each estate is closed quickly and without disputes.

Who Should Attend

This two-day, basic level seminar is designed for:

  • Attorneys
  • Accountants/CPAs
  • Certified Financial Planners
  • Trust Officers/Administrators/Managers
  • Paralegals

Course Content

DAY 1

  • Forms of Administration and When They are Used
  • First Steps and Notices, Executor Duties, Opening the Estate
  • Marshalling the Assets
  • Handling Debts and Claims Against the Estate
  • Spouse Elective Share and Disclaimers
  • Key Intestacy Laws You Must Know
  • Trusts That Affect Estate Administration

DAY 2

  • Income Tax Returns
  • Handling Distributions
  • Legal Ethics in Estate Administration
  • Estate and Trust Contests, Disputes, Challenges
  • Business Interests in Estate Administration
  • Portability and Estate, Gift, GST Taxes
  • Closing the Estate and Final Accounting

Continuing Education Credit

Continuing Legal Education – CLE: 12.00 *

International Association for Continuing Education Training – IACET: 1.20

National Association of State Boards of Accountancy – CPE for Accountants/NASBA: 14.00 *

* denotes specialty credits

October 7, 2017 in Conferences & CLE, Estate Administration, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Income Tax, Intestate Succession, Professional Responsibility, Trusts, Wills | Permalink | Comments (0)

Friday, September 29, 2017

JPMorgan Ordered to Pay More Than $4 Billion To Widow and Family

Dbpix-hack-facebookJumboMax Hopper, a former American Airline executive, is credited with pioneering an innovative reservation system for the massive airline. When he died in 2010 without a will, his estate was valued at more than $19 million. JPMorgan Chase & Co. was charged with independently and impartially dividing and distributing Hopper’s assets between the appropriate beneficiaries. Instead, the bank took an egregious amount of time to release interests in furnishings, jewelry, art, and the 900 bottles of wine and 6,700 golf putters left in the estate.

This lapse led to a lawsuit spearheaded by Hopper’s wife, Jo Hopper, and two stepchildren. A Dallas jury found that the bank’s actions constituted a breach of fiduciary duty and fraud. Most surprising however, is the $4 billion in punitive damages they awarded to the family. In response to the verdict, Jo Hopper stated: "The nation’s largest bank horribly mistreated me and this verdict provides protection to others from being mistreated by banks that think they’re too powerful to be held accountable.”

See Thomas Korosec, JPMorgan Ordered to Pay More Than $4 Billion To Widow and Family, Bloomberg, September 26, 2017.

Special thanks to Cassandra L. Hill, Jim Hillhouse (Professional Legal Marketing (PLM, Inc.), & Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.

September 29, 2017 in Current Events, Estate Administration, Estate Planning - Generally, New Cases, Professional Responsibility | Permalink | Comments (1)

Thursday, September 28, 2017

Waiting for the Other Shoe

F6b170f28abd909b187cb856c3cd3ed9--children-play-children-booksAt the time of her death in 2009, Victoria Dieringer held the majority of both nonvoting and voting stock in Dieringer Properties Inc. (DPI). DPI managed residential and commercial properties primarily located in the Portland, Oregon area. These stock holdings comprised the bulk of Dieringer’s estate, which she left to a number of charities in trust through a pour-over provision in her will. Dieringer intended for the gifts to these charities to be funded through sale of the corporate stock. DPI redeemed the stock to fund the trust, but did so at substantially reduced rates relative to its reported value. Despite this, the trust executor reported the decedent’s stock at its full value on the estate tax return and sought a charitable deduction reflecting the reported value. The Tax Court held that this was not allowed and assessed a tax deficiency and penalty of over $5 million. The case is on appeal, but it looks as though tumultuous times are ahead for the executor.

See Russell A. Willis III, Waiting for the Other Shoe, taxnotes, September 18, 2017.

Special thanks to Russell A. Willis III, J.D., LL.M., director, The Greystocke Project, for bringing this article to my attention. 

September 28, 2017 in Current Events, Estate Administration, Estate Planning - Generally, Estate Tax, New Cases, Professional Responsibility, Trusts, Wills | Permalink | Comments (0)

Tuesday, September 26, 2017

Opinion 131: Representing Clients with Diminished Capacity Where The Subject of The Representation Is The Client's Diminished Capacity

Colorado11The Colorado Bar Association recently released Formal Ethics Opinion 131. An abstract of the opinion is below:

This opinion addresses the representation of clients where the subject of the representation is an adult protective proceeding (guardianship and conservatorship). It also encompasses ethical issues when the lawyer is acting as a guardian ad /item in an adult protective proceeding or when the lawyer represents an allegedly incapacitated person. While lawyers are appointed as guardians ad /item in the majority of adult protective proceedings, non-lawyers may also be appointed.

The Colorado Bar Association (CBA) has issued a separate formal ethics opinion that addresses representing clients with diminished capacity where the presence of diminished capacity is incidental to the lawyer's representation.  See CBA Formal Op.126, "Representing the Adult Client With Diminished Capacity" (2015). This opinion does not cover representation of individuals who are minors or who may have a mental incapacity in addition to their incapacity due to their minority.

September 26, 2017 in Estate Planning - Generally, Guardianship, Professional Responsibility | Permalink | Comments (0)

Thursday, September 21, 2017

CLE on The Probate Process From Start to Finish

0000000 CLEThe National Business Institute is holding a conference entitled, The Probate Process From Start to Finish, which will take place Tuesday, September 19, 2017, at the Holiday Inn Louisville East-Hurstbourne in Louisville, KY. Provided below is a description of the event:

Program Description

Handling Probate from Initial Notices Through the Estate Closing

This "a through z" guide to probate is designed to take you from the first days of the estate timeline through all the steps of marshaling and valuing estate assets, locating and paying the creditors, paying the beneficiaries, and laying the estate to rest. You will receive the latest updates on the probate court procedure and tax laws, practical guidance from experienced probate attorneys on using spousal elective share and resolving estate disputes, and sample forms and checklists to speed up the administration process. Build a solid foundation for your probate practice - register today!

  • Learn the procedure, rules and practical steps to effectively administer a probate.
  • Determine what form of administration is appropriate for a specific probate case.
  • Clarify the order of inheritance for an estate when there is no will.
  • Locate assets and obtain ownership documents more easily with a list of local and online resources.
  • Get a complete view of the sequence of events that must happen before the estate can be closed.
  • Identify common actions that trigger malpractice liability and get tips for staying in the clear.
  • Get practical advice for honoring or contesting all claims against the estate.
  • Find new ways to resolve liquidity issues that delay estate closing and final distributions and payments.
  • Learn what common closing mistakes can allow the estate to be re-opened, and how to avoid them.

Who Should Attend

This basic level seminar is designed for professionals who want to be more effective in handling the probate process, including:

  • Attorneys
  • Paralegals
  • CPAs and Accountants
  • Financial Planners and Wealth Managers
  • Tax Planning Specialists
  • Trust Officers
  • Tax Preparers

Course Content

  1. Initial Filing in Probate Court and Estate Timeline
  2. Law of Intestate Succession
  3. Inventory and Appraisement
  4. Probate Property vs. Non-Probate Assets
  5. Handling Claims Against the Estate
  6. Tax Reporting and Post-Mortem Tax Matters
  7. Sale of Property and Distributions
  8. Final Accounting and Closing the Estate
  9. Probate Disputes and Litigation
  10. Ethics

Continuing Education Credit

Continuing Legal Education – CLE: 6.75 *

Financial Planners – Financial Planners: 8.00

International Association for Continuing Education Training – IACET: 0.70

National Association of State Boards of Accountancy – CPE for Accountants/NASBA: 8.00 *

Professional Achievement in Continuing Education – PACE: 8.00 *

* denotes specialty credits

September 21, 2017 in Conferences & CLE, Estate Planning - Generally, Professional Responsibility, Trusts, Wills | Permalink | Comments (1)